EPF member’s guide to EPS: Eligibility, early pension cuts, and family benefits

Representative image

If you are an EPF member, your employer also puts a share into the Employees’ Pension Scheme (EPS 1995). You generally need at least 10 years of pensionable service to get a monthly pension. Full pension starts at age 58. You can take it earlier from age 50, but the amount is cut because you are drawing it for longer. EPS is meant for salaried workers; the contribution is based on your basic pay plus DA, subject to the EPS salary cap.

EPS uses a simple formula: monthly pension = (pensionable salary × pensionable service) ÷ 70. Pensionable salary is usually the average of your last 60 months’ basic plus DA, and for most members it is capped at Rs 15,000 a month for calculation. Pensionable service is your total years under EPS, rounded according to scheme rules.

Suppose your pensionable salary (after applying the cap) is Rs 15,000 and you have 25 years of pensionable service. Your monthly pension would be (Rs 15,000 × 25) ÷ 70, which is about Rs 5,357. If you retire earlier than 58, this figure is reduced for every year you take it early. If you work longer, your service years add up and the number rises.

Many members earn more than Rs 15,000, but EPS still counts only up to Rs 15,000 for contributions and for the pension formula. That naturally limits the final pension. Some older members who exercised the “higher pension” option on actual salary (under specific EPFO windows) may have a higher pensionable salary, but most post-2014 joiners will be under the Rs 15,000 cap.

If the member dies, the spouse may receive a widow pension, and up to two children can receive a child pension up to the specified age. There is also a minimum pension floor, but it is quite low, so you should not rely on EPS alone for retirement income.

If you exit before completing 10 years, you are not eligible for a monthly pension. Instead, you can take a withdrawal benefit from the EPS part based on a table of years served, or you can keep the service and transfer it to your next job so the pensionable service keeps growing. Keeping the account alive and transferring it is usually better for long-term pension.

Think of EPS as a base layer that pays a fixed monthly amount in your 60s. Because the formula and salary cap limit the payout, you should build the rest of your retirement income through EPF accumulations, NPS, mutual funds, or other savings. Aim to complete at least 10 years of service, avoid gaps if you can, and check that your service history is correctly reflected in your UAN/EPFO records so your pensionable service is not short by mistake.

EPS is valuable, but it is designed to provide a modest, fixed income. Know your eligibility, estimate your amount early using the simple formula, and build parallel retirement savings so your total income in retirement matches your needs.